Oil hits 2016 peaks on fading supply glut fears

"Production outages in Canada and Nigeria continue to support prices," wrote Capital Economics analysts Caroline Bain and Julian Jessop in a research note.

Prices also shot up after Goldman Sachs said supply disruptions in Africa's biggest oil producer Nigeria -- along with better demand -- had created a surprising short-term deficit. Image Source: Reuters

World oil prices soared this week to 2016 highs as Canadian and Nigerian supply problems and sliding US production helped reduce the stubborn global supply glut.

New York's benchmark West Texas Intermediate (WTI) for June delivery soared Wednesday to $48.95 per barrel -- the highest level since October 2015.

On the same day, European benchmark Brent North Sea crude for July delivery hit $49.85, which had not been reached since early November.

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"Production outages in Canada and Nigeria continue to support prices," wrote Capital Economics analysts Caroline Bain and Julian Jessop in a research note.

Prices also shot up after Goldman Sachs said supply disruptions in Africa's biggest oil producer Nigeria -- along with better demand -- had created a surprising short-term deficit.

The US banking giant described the situation in Nigeria as "systemic" and production in that country is likely to remain curtailed for the rest of the year.

"Based on the report ... demand has started to outstrip supply. The sentiment is picking up quite a bit and perhaps prices may push above the $50 mark in the next couple of weeks, provided the dollar does not strengthen further," said IG analyst Bernard Aw.

"Traders think that the situation in Canada might persist longer than expected. If the wildfires damage infrastructure, this may delay production even longer," he told AFP.

In Canada, oil worker camps in the Fort McMurray oil sands region remained closed down and some one million barrels a day of production shuttered as forest fires expanded away from the area.

A massive forest fire that threatened Canada's oil sands and forced tens of thousands to flee their homes in Fort McMurray crossed into neighbouring Saskatchewan province on Friday.

The fire has more than doubled in size this week, to more than 505,000 hectares, Alberta wildfire manager Chad Morisson told a press conference.

He estimated it to be about 700 hectares on the Saskatchewan side, crossing into the province northeast of Gordon Lake, Alberta.

EY oil and gas analyst Sanjeev Gupta said the market was also watching indicators of the pace of growth in major oil consuming nations around the world after Japan turned in better-than-expected 0.4% growth in the first quarter of the year.

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